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AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
  • If you are not ready to take this test, you can study here.
  • Match each statement with the correct term.
  • Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.

This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. The mechanism for combining production resources - with existing technology - into finished goods and services






2. Ex -y = (%dQd good X) / (%d Price Y). If Ex -y > 0 - goods X and Y are substitutes. If Ex -y < 0 - goods X and Y are complementary






3. Occurs when an economy's production possibilities increase. This can be a result of more resources - better resources - or improvements in technology.






4. Another way of saying that firms are earning zero economic profits or a fair rate of return on invested resources






5. The ability to set the price above the perfectly competitive level






6. A firm that has market power in the factor market (a wage-setter)






7. AFC = TFC/Q






8. Two goods are consumer complements if they provide more utility when consumed together than when consumed separately






9. A good for which higher income decreases demand






10. Occurs when there is no more incentive for firms to enter or exit. P=MR=MC=ATC and profit = 0






11. A measure of industry market power. Sum the market share of the four largest firms and a ratio above 40% is a good indicator of oligopoly






12. The output where AVC is minimized. If the price falls below this point - the firm chooses to shut down or produce zero units in the short run






13. The firm hires the profit maximizing amount of a resource at the point where MRP = MRC






14. Exists when the production of a good imposes disutility upon third parties not directly involved in the consumption or production of the good






15. ATC = TC/Q = AFC + AVC






16. The philosophy that a citizen should receive a share of economic resources proportional to the marginal revenue product of his or her productivity






17. Total product divided by labor employed. APL = TPL/L






18. Ei > 1






19. The additional benefit received from the consumption of the next unit of a good or service






20. The output where ATC is minimized and economic profit is zero






21. The least competitive market structure - characterized by a single producer - with no close substitutes - barriers to entry - and price making power






22. The most desirable alternative given up as the result of a decision






23. The study of how people - firms - and societies use their scarce productive resources to best satisfy their unlimited material wants.






24. Holding all else equal - when the price of a good rises - consumers decrease their quantity demanded for that good






25. For one good - constrained by prices and income - a consumer stops consuming a good when the price paid for the next unit is equal to the marginal benefit received






26. TR = P * Qd






27. The additional cost incurred from the consumption of the next unit of a good or a service






28. Production of maximum output for a given level of technology and resources. All points on the PPF are productively efficient






29. Occurs when LRAC is constant over a variety of plant sizes






30. The imbalance between limited productive resources and unlimited human wants






31. AVC = TVC/Q






32. MUx / Px = MUy/Py or MUx/MUy = Px/Py






33. Entry of new firms shifts the cost curves for all firms downward






34. Pm > MR = MC - which is not allocatively efficient and dead weight loss exists. Pm > ATC - which is not productively efficient. Profit > 0 so consumer surplus is transferred to the monopolist as profit






35. Ed > 1 - meaning consumers are price sensitive






36. Production inputs that cannot be changed in the short run. Usually this is the plant size or capital






37. A very diverse market structure characterized by a small number of interdependent large firms - producing a standardized or differentiated product in a market with a barrier to entry






38. Additional benefits to society not captured by the market demand curve from the production of a good - result in a price that is too high and a market quantity that is too low. Resources are underallocated to the production of this good






39. Excess demand; a shortage exists at a market price when the quantity demanded exceeds the quantity supplied






40. Ed = (%dQd)/(%dP). Ignore negative sign






41. The rate paid on the last dollar earned. This is found by taking the ratio of the change in taxes divided by the change in income






42. Holding all else equal - when the price of a good rises - suppliers increase their quantity supplied for that good






43. Es = (%dQs) / (%dPrice)






44. Goods that are both nonrival and nonexcludable. One person's consumption does not prevent another from also consuming that good and if it is provided to some - it is necessarily provided to all - even if they do not pay for that good






45. The practice of selling essentially the same good to different groups of consumers at different prices






46. The total quantity - or total output of a good produced at each quantity of labor employed






47. The proportion of the tax paid by the consumers in the form of a higher price for the taxed good is greater if demand for the good is inelastic and supply is elastic






48. Factors of production - 4 categories: labor - physical capital - land/natural resources - and entrepreneurial ability






49. Measures the cost the firm incurs from using an additional unit of input. In a perfectly competitive labor market - MRC = Wage. In a monopsony labor market - the MRC > Wage






50. Exists if a producer can produce a good at lower opportunity cost than all other producers